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Lisna Elianita Dewi 12082018 0525 tugas TAMK latihan soal
chapter 13 chapter 14
managment (Future University Egypt)
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TUGAS MATA KULIAH 
TEORI DAN APLIKASI MANAJEMEN KEUANGAN 
Latihan Soal: 
Chapter 13 Leverage and Capital Structure & Chapter 14 Payout Policy 
 
 
 
 
Disusun oleh: 
 
 
 
 
 
UNIVERSITAS PADJADJARAN 
FAKULTAS EKONOMI DAN BISNIS 
MAGISTER MANAJEMEN 
2020 
Lisna Elianita Dewi 120820180525 
 
 
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Chapter 13: Leverage and Capital Structure 
 
OPENER-IN-REVIEW 
 2010 2011 2012 
Revenues $ 65,225 $ 108,249 $ 156,508 
EPS $ 2.16 $ 2.95 $ 6.31 
 
 2014 2015 2016 
Revenues $ 182,795 $ 233,715 $ 215,091 
EPS $ 6.49 $ 9.28 $ 8.35 
 
a. Now that the company has decided to use the proceeds from a bond issue to repurchase 
shares, what would you expect the effect of that decision to be on Apple’s degree of 
total leverage? 
➢ Saya berharap keputusan tersebut berdampak besar pada total laverage, karena 
melihat dari revenues dan EPS yang terus meningkat dari tahun 2010-2015. 
Walaupun pada tahun 2016 mengalami penurunan semoga itu tidak berdampak 
besar pada total laverage. 
b. Calculate the percentage change in revenues and in EPS from 2010 to 2011 and from 
2011 to 2012 (before Apple altered its capital structure). What was Apple’s degree of 
total leverage at this time? 
➢ 2010-2011 
Revenues = 
$108,249 − $65,225$65,225 × 100% = +66% 
EPS = 
$3.95 − $2.16$2.16 × 100% = +83% 
DTL = 
𝑝𝑒𝑟𝑠𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝐸𝑃𝑆𝑝𝑒𝑟𝑠𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑠𝑎𝑙𝑒𝑠 = +83%+66% = 1.2 
➢ 2011-2012 
Revenues = 
$156,508 − $108,249$108,249 × 100% = +45% 
EPS = 
$6.31−$3.95$3.95 × 100% = +60% 
DTL = 
𝑝𝑒𝑟𝑠𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝐸𝑃𝑆𝑝𝑒𝑟𝑠𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑠𝑎𝑙𝑒𝑠 = +60%+45% = 1.3 
c. Calculate the percentage changes in revenues and EPS from 2014 to 2015 and form 
2015 to 2016 (after Apple had been altering its capital structure for few years). What 
was Apple’s degree of total leverage at this time? 
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➢ 2014-2015 
Revenues = 
$233,715−$182,795$182,795 × 100% = +28% 
EPS = 
$9.28−$6.49$6.49 × 100% = +43% 
DTL = 
𝑝𝑒𝑟𝑠𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝐸𝑃𝑆𝑝𝑒𝑟𝑠𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑠𝑎𝑙𝑒𝑠 = +43%+28% = 1.5 
➢ 2015-2016 
Revenues = 
$215,091−$233,715$233,715 × 100% = −8% 
EPS = 
$8.35−$9.28$9.28 × 100% = −10% 
DTL = 
𝑝𝑒𝑟𝑠𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝐸𝑃𝑆𝑝𝑒𝑟𝑠𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑠𝑎𝑙𝑒𝑠 = −10%−8% = 1.2 
d. Do your findings in questions b and c align with your expectations from question a? 
➢ Harapan saya pada pertanyaan a sejalan dengan temuan saya pada pertanyaan b 
dan c. Karena pada tahun 2010-2011 mengalami peningkatan 66% dalam revenue 
(dari $ 65,225 menjadi $ 108,249), perusahaan akan mengalami peningkatan 83% 
dalam laba per saham (dari $ 2.16 menjadi $ 3.95), dampak total leverage 
menghasilkan perubahan persentase laba per saham yaitu 1.2 kali persentase perubahan 
revenue, apakah revenue meningkat atau menurun. Pada tahun 2011-2012 mengalami 
peningkatan 45% dalam revenue (dari $ 108,249 menjadi $ 156,508), perusahaan akan 
mengalami peningkatan 60% dalam laba per saham (dari $ 3.95 menjadi $ 6.31) 
dampak total leverage menghasilkan perubahan persentase laba per saham yaitu 1.3 
kali persentase perubahan revenue, apakah revenue meningkat atau menurun. Pada 
tahun 2014-2015 mengalami peningkatan 28% dalam revenue (dari $ 182,795 menjadi 
$ 233,715), perusahaan akan mengalami peningkatan 43% dalam laba per saham (dari 
$ 6.49 menjadi $ 9.28) dampak total leverage menghasilkan perubahan persentase laba 
per saham yaitu 1.5 kali persentase perubahan revenue, apakah revenue meningkat atau 
menurun. Pada tahun 2015-2016 mengalami penuruan 8% dalam revenue (dari $ 
233,715 menjadi $ 215,091), perusahaan akan mengalami penurunan 10% dalam laba 
per saham (dari $ 9.28 menjadi $ 8.35) dampak total leverage menghasilkan perubahan 
persentase laba per saham yaitu 1.2 kali persentase perubahan revenue, apakah revenue 
meningkat atau menurun. 
 
 
 
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SEFL-TEST PROBLEMS 
ST 13-1 
a. At what level of sales (in units) would the firm break even on operations (that is, 
EBIT = $0)? 
➢ FC = $ 250,000 
P = $ 7.50 
VC = $ 3.00 
➢ Q = 
𝐹𝑉𝑃−𝑉𝐶 = $250,000$7.50−$3.00 = 55.556 𝑢𝑛𝑖𝑡 
b. Calculate the firm’s earnings per share (EPS) in tabular form at (1) the current level 
of sales and (2) a 120,000-unit sales level. 
 
Sales (in units) 100,000 120,000 
Sales revenue ($7.50/unit × sales in 
units) 
$750,000 $900,000 
Less: Variable operating cost 
($3.00/unit × sales in units) $300,000 $360,000 
Less: Fixed operating costs $250,000 $250,000 
Earnings before interest and taxes 
(EBIT) 
$200,000 $290,000 
 
 
EBIT $200,000 $290,000 
Less: Interest $80,000 $80,000 
Net profit before taxes $120,000 $210,000 
Less: Taxes (T = 0.40) $48,000 $84,000 
Net profit after taxes $72,000 $126,000 
Less: Preferred stock $40,000 $40,000 
Earnings available for common 
stockholders 
$32,000 $86,000 
Earnings per share (EPS) $32,00020,000 = $1.60 $86,00020,000 = $4.30 
 
 
+20% 
+45% 
+169% 
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c. Using the current $750,000 level of sales as a base, calculate the firm’s degree of 
operating leverage (DOL). 
➢ DOL = 
𝑝𝑒𝑟𝑠𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝐸𝐵𝐼𝑇𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑠𝑎𝑙𝑒𝑠 = +45%+20% = 2.25 
d. Using the EBIT associated withthe $750,000 level of sales as a base, calculate the 
firm’s degree of financial leverage (DFL). 
➢ DFL = 
𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝐸𝑃𝑆𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝐸𝐵𝐼𝑇 = +169%+45% = 3.7 
e. Use the degree of total leverage (DTL) concept to determine the effect (in 
percentage terms) of a 50% increase in TOR’s sales from the $750,000 base level 
on its earnings per share. 
➢ DTL = DOL × DFL = 225 × 3.76 = 8.46 
DTL = 
𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝐸𝑃𝑆𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑠𝑎𝑙𝑒𝑠 
8.46 = 
𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝐸𝑃𝑆50% 
Percentage change in EPS = 8.46 × 0.50 = +43% 
 
ST 13-2 EBIT–EPS analysis Newlin Electronics is considering additional financing of 
$10,000. It currently has $50,000 of 12% (annual interest) bonds and 10,000 shares of 
common stock outstanding. The firm can obtain the financing through a 12% (annual 
interest) bond issue or through the sale of 1,000 shares of common stock. The firm has 
a 40% tax rate. 
a. Calculate two EBIT–EPS coordinates for each plan by selecting any two EBIT 
values and finding their associated EPS values. 
Source of capital Bond Stok 
Long term debt $60,000, 12% annual 
interest 
$50,000, 12% annual 
interest 
Annual interest = 0.12 × 60,000 = 7,200 0.12 × 50,000 = 6,000 
Common stock 10,000 shares 11,000 shares 
 
 Bond Stock 
EBIT $30,000 $40,000 $30,000 $40,000 
Less: Interest $7,200 $7,200 $6,000 $6,000 
Net profit before taxes $22,800 $32,800 $24,000 $36,000 
Less: Taxes (T=0.40) $9,120 $13,120 $9,600 $13,600 
Net profit after taxes $13,680 $19,680 $14,400 $20,400 
EPS (10,000) $13,68010,000= $1.37 $19,68010,000= $1.97 
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EPS (11,000) $14,40011,000= $1.31 $20,40011,000= $1.85 
 
b. Plot the two financing plans on a set of EBIT–EPS axes. 
 
c. On the basis of your graph in part b, at what level of EBIT does the bond plan 
become superior to the stock plan? 
➢ Rencana obligasi (Rencana A) menjadi lebih unggul daripada rencana stok 
(Rencana B) pada sekitar $ 20.000 EBIT, sebagaimana diwakili oleh garis 
vertikal putus-putus pada gambar di bagian b. (Catatan: Poin sebenarnya adalah 
$ 19.200, yang ditentukan secara aljabar dengan menggunakan teknik yang 
dijelaskan dalam catatan kaki 18). 
 
ST 13-3 
a. Compute the estimated share value associated with each of the capital structures, 
using the simplified method described in this chapter (see Equation 13.12). 
Capital 
structure debt 
ratio 
Expected 
earnings per 
share 
Required 
return 
Estimated share value 
0% $3.12 13% $3.12 ÷ 0.13 = $24.00 
10 $3.90 15 $3.90 ÷ 0.15 = $26.00 
20 $4.80 16 $4.80 ÷ 0.16 = $30.00 
30 $5.44 17 $5.44 ÷ 0.17 = $32.00 
40 $5.51 19 $5.51 ÷ 0.19 = $29.00 
50 $5.00 20 $5.00 ÷ 0.20 = $25.00 
60 $4.40 22 $4.40 ÷ 0.22 = $20.00 
 
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b. Determine the optimal capital structure on the basis of (1) maximization of expected 
earnings per share and (2) maximization of share value. 
➢ Maksimalisasi expected earnings per share dengan dest ratio sebesar 40% dan 
EPS sebesar $5.51 per saham. Dan maksimalisasi nilai saham dengan debt ratio 
sebesar 30% dan nilai saham sebesar $32.00. 
c. Which capital structure do you recommend? Why? 
Saya merekomendasikan capital structure dengan debt ratio sebesar 30% karena 
memberikan nilai saham yang maksimal yaitu sebesar $32.00 kepada pemegang 
saham, ini sesuai dengan tujuan perusahaan yang ingin memaksimalkan kekayaan 
pemegang saham. 
 
WARM-UP EXERCISES 
E13-1 Shelby’s Photographs has fixed operating costs of $16,500 and variable operating costs 
of $8 per photograph pack. The photograph packs sell for $20 each. How many photograph 
packs must be sold for the firm to break even in terms of EBIT? 
➢ FC = $ 16,500 
P = $ 20 
VC = $ 8 
➢ Q = 
𝐹𝑉𝑃−𝑉𝐶 = $16,500$20−$8 = 1.375 𝑢𝑛𝑖𝑡𝑠 
Pada penjualan 1.375 unit, EBIT perusahaan harus sama dengan $0. Perusahaan 
akan memiliki EBIT positif jika penjualan lebih besar dari 1.375 unit dan EBIT 
negative atau rugi juga penjualan kurang dari 1.375 unit. 
 
E13-2 Rio Mare currently has fixed operating costs of €1,100,000, and it sells canned tuna for 
€1.50 per can, while incurring variable operating costs of €0.65 per can. If the company 
can invest in better storing technology that would simultaneously raise its fixed costs to 
€1,200,000, but lower its variable cost to €0.50 per can, what will the impact be on its 
operating breakeven point in cans of tuna? 
1) Operating breakeven point = 
€1,100,000€1.50−€0.65 = 935.000 𝑢𝑛𝑖𝑡 
2) Operating breakeven point = 
€1,200,000€1.50−€0.65 = 1,020,000 𝑢𝑛𝑖𝑡 
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3) Operating breakeven point = 
€1,100,000€1.50−€0.50 = 1.100.000 𝑢𝑛𝑖𝑡 
4) Operating breakeven point = 
€1,200,000€1.50−€0.50 = 1, .200.000 𝑢𝑛𝑖𝑡 
Jika membandingkan operating breakeven point yang dihasilkan dengan nilai awal 
adalah 935.000 unit. Dapat dilihat bahwa kenaikan biaya dari tindakan 1-4 
meningkatkan breakeven. 
E13-3 Chico’s has sales of 15,000 units at a price of $20 per unit. The firm incurs fixed 
operating costs of $30,000 and variable operating costs of $12 per unit. What is Chico’s 
degree of operating leverage (DOL) at a base level of sales of 15,000 units? 
➢ Q = 15,000 
P = $20 
VC = $12 
FV = $30,000 
➢ DOL at base sales level Q = 
𝑄×(𝑃−𝑉𝐶)𝑄×(𝑃−𝑉𝐶)−𝐹𝐶 
DOL at 15,000 units = 
15,000×($20−$12)15,000×($20−$12)−$30,000 = $120,00090,000 = 1.3 
Perhitungan ini menunjukkan bahwa Chico’s berubah dalam volume penjualan 
menghasilkan perubahan EBIT yang 1.3 kali lebih besar dalam persentase. 
 
E13-4 Parker Investments has EBIT of $20,000, interest expense of $3,000, and preferred 
dividends of $4,000. If it pays taxes at a rate of 38%, what is Parker’s degree of financial 
leverage (DFL) at a base level of EBIT of $20,000? 
➢ EBIT = $20,000 
I = $3,000 
PD = $4,000 
Tarif pajak (T = 0,38) 
➢ DFL at base level EBIT = 
𝐸𝐵𝐼𝑇𝐸𝐵𝐼𝑇−𝐼−[𝑃𝐷× 11−𝑇] 
DFL at $20,000 EBIT = 
$20,000$20,000−$3,000−[$4,000× 11−0,38] = $20,000$10,548 = 1.9 
Perhitungan ini menunjukkan bahwa Ketika EBIT parker berubah, EPSnya 
berubah 1.9 kali lebih cepat berdasarkan persentase karena financial leverage 
perusahaan. Semakin tinggi nilai ini, semakin besar tingkat financial leverage. 
 
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E13-5 Shaga shpk is an Albanian company that produces and sells furniture. Last year it had 
sales of 2,000 units at a price of L12,000 per unit (Albania’s currency is Albanian lek, L). 
It faced fixed operating costs of L12,500,000 and variable costs of L4,000 per unit. The 
company is subject to a tax rate of 15% and has a weighted average cost of capital of 10%. 
Calculate Shaga’s net operating profits after taxes (NOPAT), and use it to estimate the 
value of the firm. 
➢ EBIT = (2,000 × L12,000) – L12,500,000 – (2,000 × L4,000) 
= L24,000,000 – L12,500,000 – L8,000,000 
= L3,500,000 
➢ NOPAT = EBIT × (1 – T) = L3,500,000 × (1 – 0.5) = L2,975,000 
➢ Value of shaga’s shpk = 𝑁𝑂𝑃𝐴𝑇𝑤𝑒𝑖𝑔ℎ𝑡 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 = 𝐿2,975,0000.1 = 𝐿29,750,000 
 
PROBLEMS 
P13-1 Breakeven point: Algebraic The Golf Shop needs to forecast the number of a 
specific golf set it needs to sell to break even. The golf set sells for $1,250 per set. The 
fixed operating costs are $21,000 while the variable operating costs are $750per set. 
How many sets must The Golf Shop sell to breakeven on this specific golf set? 
➢ FC = $21,000 
P = $1,250 
VC = $750 
➢ Q = 
𝐹𝐶𝑃−𝑉𝐶 = $21,000$1,250−$750 = 42 𝑠𝑒𝑡𝑠 
 
P13-2 
Firm Jaipur Rugs FabIndia Ashok 
Carpets 
Sales price per unit INR 1,500 INR 1,900 INR 2,150 
Variable operating cost per unit 800 950 1,000 
Fixed operating cost 500,000 640,000 700,000 
a. What is the operating breakeven point in units for each firm? 
➢ Jaipur Rugs 
Q = 
𝐹𝐶𝑃−𝑉𝐶 = 500,0001,500−800 = 714 𝑢𝑛𝑖𝑡𝑠 
➢ FabIndia 
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Q = 
𝐹𝐶𝑃−𝑉𝐶 = 640,0001,900−950 = 674 𝑢𝑛𝑖𝑠𝑡𝑠 
➢ Ashok Carpets 
Q = 
𝐹𝐶𝑃−𝑉𝐶 = 700,0002,150−1,000 = 609 𝑢𝑛𝑖𝑡𝑠 
b. How would you rank the three competitors based on their risk? 
1. Peringkat pertama yang memiliki risiko paling besar adalah perusahaan Jaipur 
Rugs karena perusahaan harus bisa menjual lebih dari 714 units agar 
mendapatkan untung, apabila menjual kurang dari itu perusahaan akan rugi. 
2. Pada peringkat kedua adalah perusahaan FabIndia yang tidak memiliki risiko 
sebesar Jaipur Rugs. Perusahaan ini akan untung apabila bisa menjual 674 unit 
dan akan rugi apabila menjual di bawah 674 unit. 
3. Dan peringkat yang terakhir adalah perusahaan Ashok Carpets memiliki risiko 
yang paling kecil dibandingkan kedua perusahaan sebelumnya. Karena 
perusahaan akan untung Ketika bisa menjual 609 unit dan akan mengalami 
kerugian apabila menjual dibawah 609 unit. 
 
P13-3 Breakeven point: Algebraic and graphical Fine Leather Enterprises sells its 
single product for $129.00 per unit. The firm’s fixed operating costs are $473,000 
annually, and its variable operating costs are $86.00 per unit. 
a. Find the firm’s operating breakeven point in units. 
➢ FC = $473,000 
P = $129.00 
VC = $86.00 
➢ Q = 
𝐹𝐶𝑃−𝑉𝐶 = $473,000$129.00−$86.00 = 11,000 𝑢𝑛𝑖𝑡𝑠 
b. Label the x axis “Sales (units)” and the y axis “Costs/Revenues ($),” and then graph 
the firm’s sales revenue, total operating cost, and fixed operating cost functions on 
these axes. In addition, label the operating breakeven point and the areas of loss and 
profit (EBIT). 
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P13-4 Breakeven analysis Anke Perks is opening an arts and crafts store that focuses 
on canvases, paints, and pencils. The selling price of a canvas is $24. The variable 
operating costs are $14 per canvas while the fixed operating costs are $4,000. 
a. Calculate how many canvases Anke needs to sell to reach her operating breakeven 
point. 
➢ Q = $4,000$24−$14 = 400 𝑢𝑛𝑖𝑡𝑠 
b. Calculate the total operating costs at the breakeven point based on part a. 
➢ DOL at base sales level Q = 
𝑄×(𝑃−𝑉𝐶)𝑄×(𝑃−𝑉𝐶)−𝐹𝐶 
DOL at 400 units = 
400×($24−$14)400×($24−$14)−$4,000 = $40000 = ~ 
c. Anke’s business plan assumed that she would be able to sell 420 canvases per 
month. Will Anke be able to make a profit at this sales level? 
Anke akan mengalami perubahan volem penjualan apa bila bisa menjual 420 kanvas 
perbulannya 
d. How much EBIT will Anke generate if she sells 420 canvases per month? 
➢ EBIT = Q x (P – VC) – FV = 420 x ($24-$14) - $4,000 = $200 
 
P13-5 Breakeven analysis Paul Scott has a 2014 Cadillac that he wants to update 
with a GPS system so that he will have access to up-to-date road maps and directions. 
Aftermarket equipment can be fitted for a flat fee of $500, and the service provider 
requires monthly charges of $20. In his line of work as a traveling salesperson, he 
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estimates that this device can save him time and money, about $35 per month (as the 
price of gas keeps increasing). He plans to keep the car for another 3 years. 
A. Calculate the breakeven point for the device in months. 
➢ FC = $500 
P = $35 
VC = $20 
➢ Q = 
𝐹𝐶𝑃−𝑉𝐶 = $500$35−$20 = 33.33 𝑚𝑜𝑛𝑡ℎ𝑠 
B. Based on a, should Paul have the GPS system installed in his car? 
Karena perangkat GPS sendiri kembali dalam 33,3 bulan, yang kurang dari 36 bulan 
yang Paul terus berencana untuk terus memiliki mobil, ia harus menginstal 
perangkat GPS di mobilnya. 
 
P13-6 Breakeven point: Changing costs/revenues Anki is a finish manufacturer of 
rugs. Last year, it sold rugs for €350, with a variable operating cost of €200 per rug and 
a fixed operating expenses of €1,050,000. 
a. How many rugs must Anki sell this year to achieve the breakeven point for the 
stated operating costs if all figures remain the same as for last year? 
➢ FC = €1,050,000 
P = €350 
VC = €200 
➢ Q = 
𝐹𝐶𝑃−𝑉𝐶 = €1,050,000€350−€200 = 7,000 𝑟𝑢𝑔𝑠 
b. How many rugs must Anki sell this year to achieve the breakeven point for the 
stated operating costs if fixed operating costs increase to €1,300,000 and all other 
figures remain the same? 
➢ FC = €1,300,000 
P = €350 
VC = €200 
➢ Q = 
𝐹𝐶𝑃−𝑉𝐶 = €1,300,000€350−€200 = 8,667 𝑟𝑢𝑔𝑠 
c. How many rugs must Anki sell this year to achieve the breakeven point for the 
stated operating costs if the selling price increases to €320 and all other costs don’t 
change? 
➢ FC = €1,050,000 
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P = €320 
VC = €200 
➢ Q = 
𝐹𝐶𝑃−𝑉𝐶 = €1,050,000€320−€200 = 8,750 𝑟𝑢𝑔𝑠 
d. How many rugs must Anki sell this year to achieve the breakeven point for the 
stated operating costs if the variable operating cost per rug increases to €220 and all 
other figures remain the same? 
➢ FC = €1,050,000 
P = €350 
VC = €220 
➢ Q = 
𝐹𝐶𝑃−𝑉𝐶 = €1,050,000€350−€220 = 8,077 𝑟𝑢𝑔𝑠 
 
e. What conclusions about the operating breakeven point can be drawn from your 
answers? 
➢ Jika membandingkan operating breakeven point yang dihasilkan dengan nilai 
awal adalah 7.000 rugs. Dapat dilihat bahwa kenaikan biaya dari tindakan b dan 
c meningkatkan breakeven. Sedangkan pada tindakan c mengalami penurunan 
dari tindahan b dan c. 
 
P13-7 
 
 
P13-8 EBIT sensitivity Millard’s Enterprises sells wooden baby chairs for $28 per 
chair. The fixed operating costs are $23,000, and the variable operating cost is $18 per 
chair. 
a. Calculate Millard’s Enterprises’ EBIT with an estimated sales quantity of 12,000 
chairs. 
➢ EBIT = Q x (P – VC) – FV = 12,000 x ($28-$18) - $23,000 = $97,000 
b. Calculate EBIT for sales of 10,000 and 14,000 chairs, respectively. 
➢ EBIT = Q x (P – VC) – FV = 10,000 x ($28-$18) - $23,000 = $77,000 
➢ EBIT = Q x (P – VC) – FV = 14,000 x ($28-$18) - $23,000 = $117,000 
c. Calculate the percentage changes in units sold (with 12,000 chairs as the base level) 
and related percentage changes in EBIT when sales are 10,000 and 14,000 chairs, 
respectively. 
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Sales 12,000 10,000 14,000 
EBIT $97,000 $77,000 $117,000 
 
 
d. Based on the answer in part c, comment on the sensitivity of changes in EBIT in 
response to changes in sales. 
Penurunan 16% dalam penjualan (dari 12,000 menjadi 10,000 unit) menghasilkan 
penurunan 20% dalam laba sebelum bunga dan pajak (dari $97,000 menjadi 
$77,000). Dan peningkatakn 40% dalam penjualan (dari 10,000 menjadi 14,000 
unit) menghasilkan peningkatan 52% dalam laba sebelum bunga dan pajak (dari 
$77,000 menjadi$117,000). 
 
P13-9 Degree of operating leverage Diane’s Florist has fixed operating costs of 
$3,825, variable operating costs of $9.50 per flower arrangement, and an average 
selling price of $24.50 per flower arrangement. 
a. What is Diane’s Florist’s operating breakeven point in units (flower arrangements)? 
➢ FC = $3,825 
P = €24.50 
VC = €9.50 
Q = 
𝐹𝐶𝑃−𝑉𝐶 = €3,825€24.50−€9.50 = 255 𝑢𝑛𝑖𝑡𝑠 
b. Calculate the EBIT for sales of 260, 300, and 340 flower arrangements, 
respectively. 
➢ EBIT = Q x (P – VC) – FV = 260 x ($24.50 − $9.50) - $3,825 = $75 
➢ EBIT = Q x (P – VC) – FV = 300 x ($24.50 − $9.50) - $3,825 = $675 
➢ EBIT = Q x (P – VC) – FV = 340 x ($24.50 − $9.50) - $3,825 = $1,275 
c. Calculate the percentage changes in units (flower arrangements) sold and EBIT if 
sales change from the base of 300 flower arrangements to 260 and 340 flower 
arrangements, respectively. 
 
Sales 300 260 340 
EBIT $675 $75 $1,275 
 
-20% +52% 
-16% +40% 
-89% +1,600% 
-13% +31% 
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d. Calculate the degree of operating leverage at 300 flower arrangements. 
➢ DOL at base sales level Q = 
𝑄×(𝑃−𝑉𝐶)𝑄×(𝑃−𝑉𝐶)−𝐹𝐶 
DOL at 400 units = 
300×($24.50−$9.50)300×($24.50−$9.50)−$3,825 = $4,500$675 = 6.6 
 
P13-10 
 
P13-11 EPS calculations Maitland Enterprises has $70,000 of 10% (annual interest) 
bonds outstanding, 500 shares of preferred stock paying an annual dividend of $45 per 
share, and 6,000 shares of common stock outstanding. Maitland Enterprises is taxed at 
40%. Calculate the earnings per share (EPS) when EBIT is: 
a. $130,000. 
 
EBIT $130,000 
Less: Interest $7,000 
Net profit before taxes $123,000 
Less: Taxes (T = 0.40) $49,200 
Net profit after taxes $73,800 
Less: Preferred stock $22,500 
Earnings available for common stockholders $51,300 
Earnings per share (EPS) $51,3006,000 = $8.55 
 
b. $95,000. 
 
EBIT $95,000 
Less: Interest $7,000 
Net profit before taxes $88,000 
Less: Taxes (T = 0.40) $35,200 
Net profit after taxes $52,800 
Less: Preferred stock $22,500 
Earnings available for common stockholders $30,300 
Earnings per share (EPS) $30,3006,000 = $5.05 
 
c. $73,800. 
 
EBIT $73,800 
Less: Interest $7,000 
Net profit before taxes $66,800 
Less: Taxes (T = 0.40) $26,720 
Net profit after taxes $40,000 
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Less: Preferred stock $22,500 
Earnings available for common stockholders $17,580 
Earnings per share (EPS) $17,5806,000 = $2.93 
 
 
P13-12 
 
P13-13 Financial leverage Margaret has just received an MA degree from Oxford 
University. She has outstanding school loans that require a monthly payment of £800. 
She want to rent a small apartment in London near her new workplace and estimates 
that this purchase will add £1,000 per month to her existing monthly expenses. Margaret 
will have £1,950 available after meeting all his monthly living expenses. This amount 
could vary by plus or minus 20%. 
a. To assess the potential impact of the additional borrowing on her financial leverage, 
calculate the DFL in tabular form for both the current and proposed rent payments 
using Margaret’s available $1,950 as a base and a 20% change. 
 
 Current DFL Proposed DFL 
Available for 
making loan 
payments 
€1,950 +20% €2,340 €1,950 +20% €2,340 
Less: Loan 
payments 
€800 €800 €1,800 €1,800 
Available after loan 
payments 
€1,150 +33.9% €1,540 €150 +260% €540 
 DFL = 
+33.9%+20% = 1.7 DFL = +260%+20% = 13.0 
 
 
b. Can Margaret afford the additional rent payment? 
Berdasarkan perhitungan, jumlah yang tersedia setelah pembayaran sekolah sebesar 
1.7% untuk setiap perubahan 1% dalam jumlah yang Margaret miliki untuk 
melakukan pembayaran. Perubahan ini sangat kurang responsive dan karenanya 
kurang beresiko dibandingkan dengan perubahan 13 % dalam jumlah yang tersedia 
setelah pembayaran sekolah dan apartemen untuk setiap perubahan 1% dalam 
jumlah yang tersedia untuk melakukan pembayaran sekolah dan apartemen dengan 
usulan sebesar €1,800 dalam pembayaran sekolah dan apartemen bulanan. 
 
 
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c. Should Margaret take on the additional rent payment? 
Meskipun tampaknya Margaret membayar pembayaran sekolah dan apartemen, 
tetapi dengan jumlah finansial leverage dan risiko yang cukup besar. Menurut saya 
Margaret perlu mencari apartemen yang lebih murah dari itu. 
 
P13-14 
 
P13-15 Integrative: Multiple leverage measures Hugg-a-Bugg Soft Toys 
manufactures teddy bears. The annual sales are 350,000 teddy bears at $26 per teddy 
bear. Fixed operating costs are $28,000 while variable operating costs are $16 per teddy 
bear. The manufacturer pays annually $4,500 of interest on long-term debt and $3,000 
of preferred dividends. A tax rate of 40% applies. 
A. Calculate the operating breakeven point in units. 
➢ Q = 
𝐹𝐶𝑃−𝑉𝐶 = $28,000$26−$16 = 2,800 𝑢𝑛𝑖𝑡𝑠 
B. Calculate the degree of operating leverage (DOL) at base sales levels. 
➢ DOL at 350,000 units = 
350,000×($26−$16)350,000×($26−$16)−$28,000 = $3,500,000$3,472,000 = 1.0 
C. Calculate the degree of financial leverage (DFL). 
➢ EBIT = Q x (P – VC) – FV = 350,000 x ($26-$16) - $28,000 = $3,472,000 
➢ DFL at base level EBIT = 
𝐸𝐵𝐼𝑇𝐸𝐵𝐼𝑇−𝐼−[𝑃𝐷× 11−𝑇] 
DFL at $67,500 EBIT = 
$3,472,000$3,472,000−$4,500−[$3,000× 11−0.40] = $3.472,000$3,465,700 = 1.0 
D. Calculate the degree of total leverage (DTL). 
➢ DTL at base sales level = 
𝑄×(𝑃−𝑉𝐶)𝑄×(𝑃−𝑉𝐶)−𝐹𝐶−𝐼−[𝑃𝐷× 11−𝑇] 
DTL at 350,000 units = 
$350,000×($26−$16)$350,000×($26−$16)−$28,000−$4,500−[$3,000× 11−0.40] =$3,500,000$3,465,700 = 1.0 
 
P13-16 
 
P13-17 
 
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P13-18 Capital structure Altin Greene is looking to buy a new apartment in Tirana, 
the capital of Albana. He visits Credins Bank, and reviews all the data that is required 
to get a loan. He must submit personal financial data, like his income from work, 
expenses, and existing installment loan payments. The bank then decides, based on 
specific ratios and data, whether to concede the loan. The requirements are as follows: 
1) Monthly mortgage payments <25% of monthly gross (before-tax) income. 
2) Total monthly installment payments (including the mortgage payments) <35% of 
monthly gross (before-tax) income. 
Kirsten submits the following personal financial data: 
 
Monthly gross (before-tax) income L120,000 
Monthly installment loan obligations 15,000 
Requested mortgage 12,000,000 
Monthly mortgage payments 34,000 
 
a. Calculate the ratio for requirement 1. 
➢ Pembayaran hipotek ÷ Penghasilan kotor 
= L34,000 ÷ L120,000 
= 28% > maksimum 25% 
b. Calculate the ratio for requirement 2. 
➢ Total pembayaran cicilan ÷ Pendapatan kotor 
= (L15,000 + L34,000) ÷ L120,000 
= L49,000 ÷ L120,000 
= 40% > maksimum 35% 
c. Assuming that Kirsten has adequate funds for the down payment and meets other 
lender requirements, will Kirsten be granted the loan? 
➢ Kristen tidak memenuhi standar pemberian pinjaman. Jadi, dengan asumsi 
mereka memiliki dana yang tidak cukup untuk uang muka dan tida 
memenuhi persyaratan pemberi pinjaman lainnya, Kristen tidak akan 
diberikan pinjaman 
 
P13-19 
 
 
 
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P13-20 Debt and financial risk Barrilla Group’s CEO has made the forecast of sales 
shown in the following table.Sales Probability 
€12,000,000 0.25 
15,500,000 0.50 
18,300,000 0.25 
 
The company has fixed operating costs of €1,500,000 and variable operating costs of 
75% of the sales level. The company pays €135,000 in interest per year. The tax rate 
is 24%. 
a. Compute the earnings before interest and taxes (EBIT) for each level of sales. 
Probability of sales 0.25 0.50 0.15 
Sales revenue €12,000,000 €15,500,000 €18,300,000 
Less: Fixed operating cost €1,500,000 €1,500,000 €1,500,000 
Less: Variable operating 
costs (75% of sales) 
€9,000,000 $11,625,000 €13,725,000 
Earning before interest and 
taxes (EBIT) 
€1,500,000 €2,375,000 €3,075,000 
 
b. Compute the earnings per share (EPS) for each level of sales, the expected EPS, 
the standard deviation of the EPS, and the coefficient of variation of EPS, 
assuming that there are 10,000 shares of common stock outstanding. 
c. Barilla has the opportunity to reduce its leverage to zero and pay no interest. This 
change will require that the number of shares outstanding be increased to 30,000. 
Repeat part b under this assumption. 
d. Compare your findings in parts b and c, and comment on the effect of the 
reduction of debt to zero on the firm’s financial risk. 
 
P13-21 
 
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P13-22 EBIT–EPS and capital structure Geniaware is considering two capital 
structures. The key information is shown in the following table. Assume a 24% tax 
rate. 
Source of capital Structure A Structure B 
Long-term debt €75,000 at 16% coupon rate €50,000 at 15% coupon rate 
Comman stock 8,000 shares 10,000 shares 
 
a. Calculate two EBIT–EPS coordinates for each of the structures for EBIT values of 
€30,000 and €50,000 with their associated EPS values. 
 
b. Plot the two capital structures on a set of EBIT–EPS axes. 
c. Indicate over what EBIT range, if any, each structure is preferred. 
d. Discuss the leverage and risk aspects of each structure. 
e. If the firm is fairly certain that its EBIT will exceed €55,000, which structure 
would you recommend? Why? 
 
P13-23 EBIT–EPS and preferred stock Suppose SpazioDatti is considering adding 
preferred stock to its capital structures. The key information is shown in the following 
table. Assume a 24% tax rate. 
Source of capital Structure A Structure B 
Long-term debt €100,000 at 10% coupon rate €50,000 at 5% coupon rate 
Common stock 5,000 shares 10,000 shares 
Preferred stock €10,000 with a 12% annual 
dividend 
€20,000 with a 12% annual 
dividend 
 
a. Calculate two EBIT–EPS coordinates for each of the structures for EBIT values of 
€30,000 and €40,000 with their associated EPS values. 
b. Graph the two capital structures on the same set of EBIT–EPS axes. 
c. Discuss the leverage and risk associated with each of the structures. 
d. Over what range of EBIT is each structure preferred? 
e. Which structure do you recommend if the firm expects its EBIT to be €42,000? 
Explain 
P13-24 Integrative: Optimal capital structure Medallion Cooling Systems, Inc., has 
total assets of $10,000,000, EBIT of $2,000,000, and preferred dividends of $200,000 
and is taxed at a rate of 40%. In an effort to determine the optimal capital structure, the 
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firm has assembled data on the cost of debt, the number of shares of common stock for 
various levels of indebtedness, and the overall required return on investment: 
Capital 
structure 
debt ratio 
Debt Cost 
of 
debt, 𝑟𝑑 
Number 
of 
common 
stock 
shares 
Required 
return, 𝑟𝑠 Net income EPS Price 
0% 0 0% 200,000 12% 1,000,000 5.0 41.67 
15 1,500,000 8 170,000 13 928,000 5.46 42.0 
30 3,000,000 9 140,000 14 838,000 5.98 42.71 
45 4,500,000 12 110,000 16 676,000 6.1 38.12 
60 6,000,000 15 80,000 20 460,000 5.75 28.75 
• Debt = Debt Ratio x Asset Value 
• Net Income = (EBIT - Debt x rd) x (1 - tax rate) - Preferred Dividends 
• EPS = Net Income / Shares 
• Price = EPS / rs 
a. Calculate earnings per share for each level of indebtedness. 
b. Use Equation 13.12 and the earnings per share calculated in part a to calculate a 
price per share for each level of indebtedness. 
c. Choose the optimal capital structure. Justify your choice. 
➢ Struktur modal yang optimal adalah di mana harga dan nilai perusahaan 
dimaksimalkan dan karenanya, pada tingkat utang 30%. 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Chapter 14: Payout Policy 
 
OPENER-IN-REVIEW 
The chapter opener described Whirlpool’s decision to dramatically increase its dividend in 
early 2017 to $1.10 per share. In the previous quarter, Whirlpool paid the dividend of $1 on 
March 15 to shareholder of record on March 3. When would you expect the stock to go ex 
dividend? The market price of Whirlpool stock just before the ex dividend date was $178.59. 
Immediately after the stock went ex dividend, the market price was $178.14. Is that price 
change surprising? Calculate the return that an investor might have earned if she had purchased 
the stock before the ex dividend date, sold the stock immediately afterward, and received the 
dividend a few weeks late. 
 
SELF-TEST-PROBLEM 
ST14-1 Stock repurchase The Off-Shore Steel Company has earnings available for 
common stockholders of $2 million and has 500,000 shares of common stock 
outstanding at $60 per share. The firm is currently contemplating the payment of $2 per 
share in cash dividends. 
a. Calculate the firm’s current earnings per share (EPS) and price/earnings (P/E) ratio. 
➢ Earnings per share (EPS) = 
$2.000,000500,000 = $4.00 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 
➢ Price/earnings (P/E) ratio = 
$60$4.00 = 15 
b. If the firm can repurchase stock at $62 per share, how many shares can be purchased 
in lieu of making the proposed cash dividend payment? 
➢ Proposed dividend = 500,000 saham × $2 per saham = $1,000,000 
➢ Share can be purchased = 
$1,000,000$62 = 16,129 𝑠𝑎ℎ𝑎𝑚 
c. How much will the EPS be after the proposed repurchase? Why? 
➢ Shares outstanding = 500,000 – 16,129 = 483,871 
➢ EPS = 
$2,000,000483,871 = $4.13 𝑝𝑒𝑟 𝑠𝑎ℎ𝑎𝑚 
d. If the stock sells at the old P/E ratio, what will the market price be after repurchase? 
➢ $4.13 per saham × 15 = $61.95 per saham 
 
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e. Compare and contrast the earnings per share before and after the proposed r 
epurchase. 
➢ Laba per saham (EPS) lebih tinggi setelah pembelian kembali karena ada 
lebih sedikit saham yang beredar (483.871 saham dibandingkan 500.000 
saham) untuk membagi $ 2.000.000 pendapatan yang tersedia dari 
perusahaan. 
f. Compare and contrast the stockholders’ position under the dividend and repurchase 
alternatives. 
➢ Dalam kedua kasus, pemegang saham akan menerima $ 2 per saham: 
dividen tunai $ 2 dalam kas dividen atau sekitar $ 2 kenaikan harga saham 
($ 60,00 per saham menjadi $ 61,95 per saham) dalam kas yang dibeli 
kembali. [Catatan: Perbedaan $ 0,05 per saham ($ 2,00 2 $ 1,95) adalah 
karena pembulatan]. 
 
WARM-UP-EXERCISES 
E14-1 Royal Mail Group, a British postal services provider, pays regular dividends. It 
declared a dividend of £0.077 per share for its shareholders on record on December 7. 
The Group has 1 million shares outstanding and will pay the dividend on the January 
8. How much cash will be needed to pay the dividend? When will the stock begin selling 
ex dividend? 
➢ Royal Mail Group membelisaham pada 7 Desember, mereka berhak 
menerima dividen £0.077 per saham. Dengan demikian, Royal Mail Group 
akan meneriman dividen £77,000 (£0.077 × 1,000,000 saham), yang akan 
dikirim kepada mereka pada tanggal pembayaran 7 Desember 
 
E14-2 Staff Excellence Enterprises identified two independent projects to enhance 
staff training. The investments would require financing of $750,000 and $980,800, 
respectively. Retained earnings are $1.3 million, and the firm has a capital structure 
with 40% debt and 60% equity. What dividends, if any, can be paid out by applying the 
residual theory? What would be the resulting dividend payout ratio? 
 
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E14-3 Legal & General, an insurance company, has the following stockholders’ 
equity account: 
 
Common stock (5,871,000 share at £1 
par) 
£5,871,000 
Paid-in capital in excess of par £4,000,000 
Retained earnings £550,000 
Total stockholders’ equity £10,421,000 
 
Assuming that laws and regulators in the United Kingdom define legal capital solely as 
the par value of common stock, how much of a per-share dividend can Legal and 
General pay? If legal capital were more broadly defined, to include all paid-in capital, 
how much of a per-share dividend could Legal & General pay? 
➢ Di negara-negara di mana modal hukum Legal & General didefinisikan 
sebagai nilai nominal dari saham biasa, perusahaan dapat membayar 
£4,550,000 (£4,000,000 + £550,000) dalam bentuk dividen tunai tanpa 
menggangu modalnya. Di negara-negara di mana modal hukum Legal & 
General mencakup semua modal yang disetor, Legal & General hanya dapat 
membayar dividen tunai sebesar £550,000. 
 
 
E14-4 The board of Kopi Industries is considering a new dividend policy that would 
set dividends at 60% of earnings. The recent past has witnessed earnings per share 
(EPS) and dividends paid per share as shown in the following table. 
Year EPS Dividend/share 
2016 $1.75 $0.95 
2017 1.95 1.20 
2018 2.05 1.25 
2019 2.25 1.30 
Based on Kopi’s historical dividend payout ratio, discuss whether a constant payout 
ratio of 60% would benefit shareholders. 
➢ Dividend terus meningkat dari tahun 2016-2019. Dalam tahun-tahun 
peningkatan dividen, harga saham meningkat. Pembayaran dividen Kopi 
Industries tampaknya membuat pemiliknya yakin tentang pengembalian 
yang mereka harapkan. 
 
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E14-5 Legal & General, with the equity account as describe in E14-3. Announces its 
plans to issue an additional 58,710 shares of common stock as part of its stock dividend 
plan. The current market price of Legal & General is £2.69 per share. Show how the 
proposed dividend would effect the stockholders’ equity account. 
➢ Legal & General, yang memiliki 5,871,000 saham biasa dan Legal & 
General menerbitkan saham baru 58,710 dengan harga saham yang berlaku 
£2.69 per saham. Legal & General menggeser £157,929 (£2.69 × 58,710 
saham) dari laba ditahan ke saham biasa dan akun modal disetor. Legal & 
General menambah total $58,710 (£1 × 58,710 saham) ke saham biasa, dan 
itu menambah £99,219 [(£2.69 − £1) × 58,710 𝑠𝑎ℎ𝑎𝑚] yang tersisa ke 
modal disetor melebihi par. 
Saldo akun yang dihasilkan sebagai berikut: 
 
Common stock (5,929,710 share at £1 
par) 
£5,929,710 
Paid-in capital in excess of par £4,099,219 
Retained earnings £392,708 
Total stockholders’ equity £9,784,637 
 
 
 
 
PROBLEMS 
P14-1 Dividend payment procedures At the quarterly dividend meeting, Perfect 
Frame Manufacturing declared a $2.00 per share dividend for the holders on record as 
at Monday, March 10. The outstanding common stock is 250,000 shares. The dividend 
payment date was set as Monday, March 31. Prior to the dividend declaration, the firm’s 
key accounts were as follows: 
 
Cash $650,000 Dividends payable $0 
 Retained earnings $2,000,000 
 
a. When is the ex-dividend date? 
➢ Perfect Frame Manufacturing membeli saham pada 10 Maret, dengan 
demikian ex-dividend date adalah 31 Maret. 
b. Calculate the amount of dividend payable on March 31. 
➢ $2.00 × 250,000 = $500,000 
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c. What values would the key accounts have after the March 31 payment date? 
Dengan demikian, Perfect Frame Manufacturing akan meneriman dividen $500,000 
yang akan dikirim kepada mereka pada tanggal pembayaran 31 Maret. 
d. All other things being equal, what do you expect to happen to the stock price on the 
ex-dividend date? 
➢ Saya berharap efek bersih dari menyatakan dan membayar dividen adalah 
mengurangi total asset perusahaan (dan ekuitas pemegang saham) hingga 
hampir $500,000. 
e. What is the net effect of declaring and paying dividends on the total assets of Perfect 
Frame Manufacturing? 
 
P14-2 Dividend payment Sandra Gray owns 800 shares of Steel & Fittings 
Corporation. At the annual dividend meeting, a dividend payment of $1.05 was declared 
to be paid on September 30 to all the holders of record as at September 9. 
a. What is the amount of the dividend Sandra would receive on September 30? 
➢ $1.05 × 800 saham = $840 
b. If Sandra increased her stockholding to 900 shares on September 10, what is the 
amount of the dividend she would receive on September 30? 
➢ $1.05 × 900 saham = $945 
c. What effect does declaring this dividend have on stock prices on September 7? 
 
d. If Sandra sold 200 shares for a total of $1,000 on September 15, what is the amount 
of the dividend she would receive on September 30? 
➢ $1,000 × 200 saham = $200,000 
 
P14-3 
 
P14-4 Dividend constraints The stockholders’ equity account of Plastic Enterprises 
is as follows: 
 
Common stock (280,000 share at $3.50 
par) 
$980,000 
Paid-in capital in excess of par $900,000 
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Retained earnings $1,200,000 
Total stockholders’ equity $3,080,000 
 
The earnings available for the common stockholders are $280,000 and are included in 
the $1,200,000 retained earnings. 
a. Calculate the maximum dividend per share that the firm can pay if the legal capital 
includes all paid-in capital. 
➢ Maximum dividend = 
$900,000280,000 = 3.2 per share 
b. Calculate the maximum dividend per share that the firm can pay if the legal capital 
includes only the value of the common stock. 
➢ Maximum dividend = 
$900,000$1,200,000 = 0.75 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 
c. If Plastic Enterprises has $25,000 in cash, what is the largest per-share dividend the 
firm can pay without borrowing, assuming legal capital includes all paid-in capital? 
➢ Largest dividend without borrowing = 
$25,000280,000 = 0.09 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 
d. What is the purpose of capital impairment restrictions when developing a dividend 
policy? 
 
P14-5 Dividend constraints A firm has $800,000 in paid-in capital, retained earnings 
of $40,000 (including the current year’s earnings), and 25,000 shares of common stock 
outstanding. In the current year, it has $29,000 of earnings available for the common 
stockholders. 
a. What is the most the firm can pay in cash dividends to each common 
stockholder? (Assume that legal capital includes all paid-in capital.) 
➢ Maximum dividend = 
$40,00025,000 = 1.6 per share 
b. What effect would a cash dividend of $0.80 per share have on the firm’s balance 
sheet entries? 
 
➢ Hasil dividen $ 0,80 per saham akan berupa penurunan $ 20.000 dalam 
bentuk tunai dan EPS. 
c. If the firm cannot raise any newfunds from external sources, what do you 
consider the key constraint with respect to the magnitude of the firm’s dividend 
payments? Why? 
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➢ Uang tunai adalah kendala utama, karena perusahaan tidak dapat membayar 
lebih banyak dividen daripada uang tunai, kecuali meminjam. 
 
 
P14-6 
 
P14-7 Alternative dividend policies Over the last 10 years, a firm has had the earnings 
per share shown in the following table. 
Year Earnings per share 
2019 $4.00 
2018 3.80 
2017 3.20 
2016 2.80 
2015 3.20 
2014 2.40 
2013 1.20 
2012 1.80 
2011 -0.50 
2010 0.25 
 
a. If the firm’s dividend policy were based on a constant payout ratio of 40% for all 
years with positive earnings and 0% otherwise, what would be the annual dividend 
for each year? 
Year Earnings per share Dividens per share 
2019 $4.00 $4.00*40% = $1.60 
2018 3.80 $3.80*40% = $1.52 
2017 3.20 $3.20*40% = $1.28 
2016 2.80 $2.80*40% = $1.12 
2015 3.20 $3.20*40% = $1.28 
2014 2.40 $2.40*40% = $0.96 
2013 1.20 $1.20*40% = $0.48 
2012 1.80 $1.80*40% = $0.72 
2011 -0.50 -$0.50*40% = -$0.20 
2010 0.25 $0.25*40% = $0.10 
 
b. If the firm had a dividend payout of $1.00 per share, increasing by $0.10 per share 
whenever the dividend payout fell below 50% for two consecutive years, what 
annual dividend would the firm pay each year? 
Year Earnings per share Dividens per share 
(a) 
Dividens per share (b) 
2019 $4.00 $4.00*40% = $1.60 $1.60 + $1.00*50% = $1.30 
2018 3.80 $3.80*40% = $1.52 $1.20 
2017 3.20 $3.20*40% = $1.28 $1.20 
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2016 2.80 $2.80*40% = $1.12 $1.10 
2015 3.20 $3.20*40% = $1.28 $1.10 
2014 2.40 $2.40*40% = $0.96 $1.00 
2013 1.20 $1.20*40% = $0.48 $1.00 
2012 1.80 $1.80*40% = $0.72 $1.00 
2011 -0.50 -$0.50*40% = -$0.20 $1.00 
2010 0.25 $0.25*40% = $0.10 $1.00 
 
c. If the firm’s policy were to pay $0.50 per share each period except when earnings 
per share exceed $3.00, when an extra dividend equal to 80% of earnings beyond 
$3.00 would be paid, what annual dividend would the firm pay each year? 
Year Earnings per share Dividens per share 
2019 $4.00 $1.30 
2018 3.80 $1.14 
2017 3.20 $0.66 
2016 2.80 $0.50 
2015 3.20 $0.66 
2014 2.40 $0.50 
2013 1.20 $0.50 
2012 1.80 $0.50 
2011 -0.50 $0.50 
2010 0.25 $0.50 
 
d. Discuss the pros and cons of each dividend policy described in parts a through c. 
➢ Melihat melalui setiap kebijakan dividen dan memutuskan mana yang akan 
menjadi tanggungan terbaik pada saat saham dibeli dan jika mereka terus 
memberikan dividen atau tidak. Misalnya, bagian a dimulai dengan dividen 
terendah tetapi tumbuh secara substansial selama sepuluh tahun hanya untuk 
diharapkan untuk melanjutkan pertumbuhan. Dalam jangka panjang, bagian 
bisa menjadi pilihan terbaik. Bagian b di sisi lain memiliki jumlah awal yang 
besar dan pada tiga tahun terakhir meningkat tapi tidak mengalami 
peningkatan yang besar. Pada bagian c mem dividen lebih kecil 
dibandingkan dengan bagian a dan b. 
 
P14-8 
 
P14-9 Stock dividend: Firm The stockholders’ equity account for Paper 
Manufacturers is shown below. The firm’s common stock has a current market price of 
$20 per share. 
 
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Preferred stock $100,000 
Common stock (120,000 share at $4 par) $480,000 
Paid-in capital in excess of par $1,920,000 
Retained earnings $360,000 
Total stockholders’ equity $2,860,000 
 
a. How will the stockholders’ equity account change if Paper Manufacturers pays a 
5% stock dividend? 
 
Preferred stock $100,000 
Common stock (120,000*5% share at $4 
par) 
$504,000 
Paid-in capital in excess of par $1,920,000 
Retained earnings $360,000 
Total stockholders’ equity $2,884,000 
 
b. How will the stockholders’ equity account change if Paper Manufacturers pays (1) 
a 10%, and (2) a 15% stock dividend? 
Preferred stock $100,000 
Common stock (120,000*10% share at $4 
par) 
$528,000 
Paid-in capital in excess of par $1,920,000 
Retained earnings $360,000 
Total stockholders’ equity $2,908,000 
 
Preferred stock $100,000 
Common stock (120,000*15% share at $4 
par) 
$552,000 
Paid-in capital in excess of par $1,920,000 
Retained earnings $360,000 
Total stockholders’ equity $2,932,000 
 
c. What is the effect of a stock dividend on the stockholders’ equity? 
Total ekuitas pemegang saham perusahaan berubah, perusahaan mengalami 
kenaikan dari setiap perusbahan stock dividend. 
 
 
P14-10 
 
P14-11 Stock dividend: Investor John McKay holds 500 common shares of Smart Life 
Corporation. The corporation has 50,000 shares outstanding. The current price per share 
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is $25. Smart Life Corporation has reported earnings available to common stockholders 
of $220,000. The firm intends to retain its earnings and pay a 10% stock dividend. 
a. Calculate the current earnings per share. 
➢ The firm currently earn per share = 
$220,00050,000 = $4.4 
b. What is John’s percentage of ownership of Smart Life Corporation before the 
stock dividend? 
➢ 
50050,000 = 1% 
c. What is John’s percentage of ownership of Smart Life Corporation after the 
stock dividend? 
➢ After Stock Dividend Total Common Stock Outstanding 
50,000 + 50,000×10% = 55,000 
➢ After Stock Dividend Sarah Holding would be = 500 + 10%×500 = 550 
➢ Proportion of the firm will sarah own after the stock dividend = 
55055,000 = 1% 
d. What do you expect the market price of the stock to be after the stock dividend? 
➢ Saya berharap harga pasar naik agar bisa menambah after stock dividen. 
 
P14-12 Stock dividend: Investor Security Data Company has outstanding 50,000 
shares of common stock currently selling at $40 per share. The firm most recently had 
earnings available for common stockholders of $120,000, but it has decided to retain 
these funds and is considering either a 5% or a 10% stock dividend in lieu of a cash 
dividend. 
A. Determine the firm’s current earnings per share. 
➢ The firm currently earn per share = 
$120,00050,000 = $2.4 
 
B. If Sam Waller currently owns 500 shares of the firm’s stock, determine his 
proportion of ownership currently and under each of the proposed stock dividend 
plans. Explain your findings. 
➢ After Stock Dividend Total Common Stock Outstanding 
50,000 + 50,000×10% = 55,000 
50,000 + 50,000×5% = 5,000 
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➢ After Stock Dividend Sarah Holding would be 
500 + 10%×500 = 550 
500 + 5%×500 = 30 
➢ Proportion of the firm will sarah own after the stock dividend 
 
55055,000 = 1% 305,000 = 6% 
 
C. Calculate and explain the market price per share under each of the stock dividend 
plans. 
D. For each of the proposed stock dividends, calculate the earnings per share after 
payment of the stock dividend. 
E. What is the value of Sam’s holdings under each of the plans? Explain. 
F. Should Sam have any preference with respect to the proposed stock dividends? Why 
or why not? 
 
P14-13 Stock split: Firm The stockholders’ equity account of Paper Weight Company 
is as follows: 
 
Preferred stock $300,000 
Common stock (200,000 share at $5 par) $1.000,000 
Paid-in capital in excessof par $500,000 
Retained earnings $820,000 
Total stockholders’ equity $2,620,000 
 
a. How will the stockholders’ equity account change if Paper Weight Company 
declares a 2-for-1 stock split? 
 
Preferred stock $300,000 
Common stock (400,000 share at $2.5 
par) 
$1,000,000 
Paid-in capital in excess of par $500,000 
Retained earnings $820,000 
Total stockholders’ equity $2,620,000 
 
b. How will the stockholders’ equity account change if Paper Weight Company 
declares a 1-for-2 reverse stock split? 
 
Preferred stock $300,000 
Common stock (200,000 share at $10 par) $2.000,000 
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Paid-in capital in excess of par $500,000 
Retained earnings $820,000 
Total stockholders’ equity $3,620,000 
 
c. How will the stockholders’ equity account change if Paper Weight Company 
declares a 3-for-1 stock split? 
 
Preferred stock $300,000 
Common stock (600,000 share at $1.6 
par) 
$960,000 
Paid-in capital in excess of par $500,000 
Retained earnings $820,000 
Total stockholders’ equity $2,580,000 
 
d. How will the stockholders’ equity account change if Paper Weight Company 
declares a 1-for-4 reverse stock split? 
 
Preferred stock $300,000 
Common stock (200,000 share at $20 par) $4,000,000 
Paid-in capital in excess of par $500,000 
Retained earnings $820,000 
Total stockholders’ equity $5,620,000 
 
e. Considering your answers in parts a to d, what do you notice? 
➢ Pada bagian a Paper Weight Company karena nilai $1,000,000 
kepemilikan after splitnya sama persis dengan nilai sebelum pemecahan 
$1,000,000, Paper Weight Company tidak mengalami keuntungan atau 
kerugian pada saham bagi hasil dari pemecahan 2 untuk 1. 
➢ Pada bagian b Paper Weight Company karena nilai $2,000,000 
kepemilikan after splitnya berubah dari nilai sebelumnya pemecahan 
$1,000,000, Paper Weight Company mengalami keuntungan pada 
saham bagi hasil pemecahan 1 untuk 2. 
➢ Pada bagian c Paper Weight Company karena nilai $960,000 
kepemilikan after splitnya berubah dari nilai sebelumnya pemecahan 
$1,000,000, Paper Weight Company mengalami kerugian pada saham 
bagi hasil pemecahan 3 untuk 1. 
➢ Pada bagian d Paper Weight Company karen nilai $4,000,000 
kepemilikan after splitnya berubah dari nilai sebelumnya pemecahan 
$1,000,000, Paper Weight Company mengalami keuntungan pada 
saham bagi hasil pemecahan 1 untuk 4. 
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P14-14 
 
P14-15 Stock split versus stock dividend Distilled Water Corporation is a company 
specializing in water purification and distributing bottled water to retailers. The 
corporation is considering a 3-for-2 stock split. The current stock price is $25 per share. 
The stockholders’ equity account is as follows: 
 
 
Preferred stock $500,000 
Common stock (150,000 share at $5 par) $900,000 
Paid-in capital in excess of par $2,850,000 
Retained earnings $760,000 
Total stockholders’ equity $5,010,,000 
 
a. What changes will occur in the stockholders’ equity account from the 3-for-2 
stock split? 
 
Preferred stock $500,000 
Common stock (450,000 share at $4 par) $1,800,000 
Paid-in capital in excess of par $2,850,000 
Retained earnings $760,000 
Total stockholders’ equity $5,910,,000 
 
 
b. What change would you expect in the stock price as a result of the stock split? 
➢ Saya berharap dari hasil stock split yang mengalami kenaikan, maka 
harga pasar juga bisa turun. 
c. Calculate the maximum cash dividend per share that the firm could pay on 
common stock before and after the stock split, assuming that legal capital 
includes all paid-in capital. 
➢ Maximum dividend before stock split = 
$2,850,000150,000 = 19.0 per share 
➢ Maximum dividend after stock split = 
$2,850,000450,000 = 6.3 per share 
d. A stockholder owns 200 shares. Based on the maximum dividends payable (see 
part c), would the stockholder prefer the 3-for-2 stock split? 
Menurut saya stockholder jangan melakukan pembagian 3 untuk 2 karena akan 
mengalami penurunan dalam mendaparkan dividen. 
e. Differentiate between stock splits and stock dividends. 
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